Garmin said it notified Tele Atlas, based in The Netherlands, of its takeover plans and will make a formal offer before Dec. 4. It hopes to close the deal in the first quarter of 2008.

Garmin has now joined the race to own one of only two global map makers, a race that was sparked when TomTom announced in July it planned to buy Tele Atlas for 2 billion euros. Nokia responded on Oct. 1 with a bid to buy the other map maker, Navteq, for $8 billion U.S. dollars.

Maps are critical to the exploding personal navigation market (PND) market because they account for up to 20 percent of the wholesale cost of a PND, said industry members, and because “maps are the key ingredient that makes these devices work,” said Garmin.

Garmin openly said its Tele Atlas bid was in response to TomTom’s bid. Dr. Min Kao, chairman and CEO of Garmin said, “Historically, Garmin believed that the independent map [model] served our industry well. However, in absence of this independence, Garmin must execute its obligation to provide market leadership.”

Another Garmin executive clarified, “Ninety days ago the industry was quite different.” He said Garmin needs an ownership stake in a map maker “in order to be able to define the maps of the future.”

All eyes are now on TomTom who could respond with a counter offer. TomTom and Tele Atlas did not respond to TWICE inquiries.

Garmin chief financial officer Kevin Rauckman said, “We can’t speculate” on a counter offer by TomTom, but he added, “Given the 15 percent premium on the existing offer out there, we feel it’s a compelling offer.”

Peter Friedland of Soliel Equity Research said, “We believe the clear loser here is TomTom, as the company will either be forced to raise its offer, creating more dilution, or the TomTom story will return to a pure-play PND hardware vendor.”

Although Garmin uses mainly Navteq maps, it said it chose to buy Tele Atlas over Navteq as it made the more sense financially. Garmin said it would require 12 to 24 months to convert to Tele Atlas maps.

TomTom and Garmin said the acquisition of Tele Atlas would lead to greater map accuracy. Garmin said it would also allow more realistic 3D map views, improved map coverage and search capabilities and more intuitive user interfaces.

Garmin also said that it now has a base of 25 million users and is looking into creating user-generated, real-time content.

Several analysts believe that the future owner of Tele Atlas, be it Garmin or TomTom, will become the takeover target of Microsoft and Google, who are entering the location-based services market.

As iSuppli noted earlier this month, Google needs maps to become a key provider of location-based services, particularly as it seeks to send advertising to cellular phones. Google would therefore need to “know” the location of those phones.

Microsoft, to a lesser extent, would also gain from such an acquisition, said iSuppli.

Garmin today announced third-quarter revenue for the period ending Oct. 31 of $729 million, up 79 percent from the quarter a year ago, and increased its revenue guidance for the full year. Net income rose to $193.5 million, up from $130 million a year ago.

Automotive and mobile GPS revenue rose 118 percent to $519 million, exceeding company expectations as high-end products continue to perform well. The company predicted this sector will increase 90 percent for the full fiscal year. Total revenue for the company is expected to exceed $2.9 billion in 2007, up from an expected $2.8 billion.

Garmin also noted it expects to increase advertising for the fourth quarter by $25 million sequentially over third-quarter advertising expenses.